SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
Form 10Q
QUARTER REPORT UNDER SECTION 13 or 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended September 30, 1994 Commission File 1-8919
CONAIR CORPORATION
(Exact name of registrant as specified on its charter)
Delaware 11-1950030
(State or other jurisdiction of (I.R.S. Identification Number)
Incorporation or organization)
150 Milford Road, East Windsor, NJ 08520
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number including area code (609) 426-1300
Not Applicable
Former name, former address and former fiscal year, if changed
since last year
Indicate by check mark whether this registrant (1) has filed all reports
required to be filed by section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
Common Stock $100.00 par value
Authorized Shares 5,000
Issued and Outstanding Shares
as of October 31, 1994 2,814
CONAIR CORPORATION AND SUBSIDIARIES
I N D E X
PAGE NO.
PART I FINANCIAL INFORMATION
Item 1: Financial Statements
Consolidated Balance Sheets
September 30, 1994 (Unaudited),
December 31, 1993 and September 30,
1993 (Unaudited) -1-
Consolidated Statements of Operations
Three months ended September 30, 1994
and 1993 (Unaudited) -2-
Consolidated Statements of Operations
Nine months ended September 30, 1994
and 1993 (Unaudited) -3-
Consolidated Statements of Cash Flows
Nine months ended September 30, 1994
and 1993 (Unaudited) -4-
Notes to Consolidated Financial
Statements (Unaudited) -5-
Item 2: Management's Discussion and Analysis
of Financial Condition and Results
of Operations -6-
PART II OTHER INFORMATION
Item 6: Exhibits and Reports on Form 8K -8-
CONAIR CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except number of shares)
ASSETS
9/30/94 12/31/93 9/30/93
CURRENT ASSETS (Unaudited) Note (Unaudited)
Cash, including cash equivalents
of $5,134, $4,096 and $3,801,
respectively.......................... $ 11,673 $ 15,856 $ 9,475
Accounts receivable, net of allowance
for doubtful accounts of $1,417,
$1,337 and $1,493, respectively....... 101,915 70,244 88,514
Inventories (Note 2)................... 134,375 85,416 105,609
Prepaid expenses....................... 1,241 1,753 2,497
Deferred income taxes.................. 2,850 2,885 3,213
252,054 176,154 209,308
PROPERTY, PLANT AND EQUIPMENT - AT COST
Net of accum. depreciation & amort..... 64,599 44,685 44,350
INVESTMENTS AND OTHER ASSETS
Investments in affiliated companies.... 444 1,141 1,039
Excess of cost over net assets of
acquired companies.................... 71,163 73,829 74,462
Deferred expenses and other assets..... 12,769 14,309 13,670
84,376 89,279 89,171
$401,029 $310,118 $342,829
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and other current
liabilities........................... $ 71,561 $ 41,014 $ 51,746
Income taxes........................... 9,549 6,756 6,808
Current portion of long-term debt...... 3,625 3,625 2,063
Notes payable.......................... 32,000 - 25,000
116,735 51,395 85,617
OTHER LIABILITIES
Long-term debt......................... 99,541 87,575 92,844
Deferred income taxes.................. 20,977 19,511 18,041
120,518 107,086 110,885
STOCKHOLDERS' EQUITY
Convertible preferred stock,
$1.00 par value: 5 5 5
Authorized 10,000 shares
Issued and outstanding - 5,000 shares
Common stock, $100 par value:
Authorized - 5,000 shares
Issued and outstanding - 2,814 shares 281 281 281
Reduction for ESOP loan guarantee...... (5,000) (5,000) (5,000)
Additional paid-in capital............. 7,633 7,633 7,633
Cumulative translation adjustments..... 72 129 123
Retained earnings...................... 160,785 148,589 143,285
163,776 151,637 146,327
$401,029 $310,118 $342,829
NOTE: The balance sheet at December 31, 1993, has been taken from the audited
financial statements at that date.
CONAIR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended September 30, 1994 and 1993
(in thousands)
1994 1993
NET SALES............................... $157,197 $132,108
COSTS AND EXPENSES:
Cost of goods sold.................... 108,813 90,686
Selling, general and
administrative....................... 34,438 31,758
143,251 122,444
INCOME BEFORE INTEREST.................. 13,946 9,664
INTEREST:
Interest expense...................... 2,201 1,967
Interest income....................... (53) (21)
2,148 1,946
INCOME BEFORE INCOME TAXES.............. 11,798 7,718
Income tax provision.................. 4,395 3,163
NET INCOME ............................. $ 7,403 $ 4,555
CONAIR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Nine months ended September 30, 1994 and 1993
(in thousands)
1994 1993
NET SALES............................... $369,832 $309,567
COSTS AND EXPENSES:
Cost of goods sold.................... 252,080 208,956
Selling, general and
administrative....................... 91,339 83,227
343,419 292,183
INCOME BEFORE INTEREST.................. 26,413 17,384
INTEREST:
Interest expense...................... 5,816 5,561
Interest income....................... (119) (64)
5,697 5,497
INCOME BEFORE INCOME TAXES.............. 20,716 11,887
Income tax provision.................. 8,076 5,212
NET INCOME.............................. $ 12,640 $ 6,675
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Nine months ended September 30,
1994 1993
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ................................. $ 12,640 $ 6,675
Adjustments to reconcile net income
to net cash used in operating
activities:
Depreciation............................... 5,324 4,893
Amortization of goodwill................... 1,869 1,899
Amortization of deferred expenses and other
assets..................................... 1,540 921
Undistributed earnings of affiliates....... (431) (18)
Deferred income taxes...................... 1,501 1,343
Tax benefit on dividends paid to ESOP...... 131 -
Other...................................... (57) (47)
Changes in operating assets and liabilities:
Accounts receivable....................... (31,671) (30,452)
Inventories............................... (48,959) (27,065)
Prepaid expenses.......................... 512 90
Accounts payable and other
current liabilities....................... 30,547 17,134
Income taxes.............................. 2,793 2,779
Net cash used in operating activities........ (24,261) (21,848)
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment.. (25,238) (5,705)
Investment in joint venture................. (575)
Net proceeds from sale of affiliate......... 2,500
(23,313) (5,705)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in short-term debt................. 32,000 25,000
Increase in long-term debt.................. 20,000 11,500
Reduction of long-term debt................. (8,034) (18,651)
Dividends .................................. (575) (375)
43,391 17,474
DECREASE IN CASH AND CASH EQUIVALENTS........ (4,183) (10,079)
CASH AND CASH EQUIVALENTS,
January 1,................................. 15,856 19,554
CASH AND CASH EQUIVALENTS,
September 30............................... $ 11,673 $ 9,475
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the nine months for:
Interest................................... $ 5,842 $ 5,264
Income taxes............................... $ 3,651 $ 1,090
CONAIR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. FINANCIAL STATEMENTS
The accompanying financial information is submitted in response to the
requirements of Form 10Q and does not purport to be financial statements
prepared in accordance with generally accepted accounting principles.
Therefore, they do not include all disclosures which might be associated with
such financial statements. In the opinion of management, this includes all
adjustments, consisting only of normal recurring accruals, necessary for a fair
statement of the results for the interim periods presented. September 30, 1993
financial statements have been reclassified to conform to current presentation.
2. INVENTORIES
Inventories are summarized as follows:
Sept. 30, Dec. 31, Sept. 30,
1994 1993 1993
Components and raw materials $ 16,196 $11,441 $ 14,053
Finished goods 118,179 73,975 91,556
$134,375 $85,416 $105,609
3. PURCHASE OF BUILDING
On March 15, 1994, the Company acquired its Stamford, Connecticut executive
office facility from Leandro P. Rizzuto, President and sole common stockholder
of the Company. The purchase price of $20,000,000 was determined based on an
independent appraisal. A ten-year unsecured loan in the amount of $20,000,000
was obtained by the Company on the above date to finance this transaction. The
interest rate on this new loan is 7%. Principal repayments on this loan begin
on June 1, 1996 with the payment of $625,000 and variable sums are due semi-
annually on June 1 and December 1 until a final payment of $4,000,000 at
maturity on February 28, 2004. The Company leased back to Leandro P. Rizzuto a
portion of the facility for a period of 99 years subject to the Company's
option, for a period of 10 years, to buy back the lease rights. The option
price for the Company to repurchase the lease rights is $4,000,000 for the
first five years, escalating to $6,400,000 over the remaining five years. The
initial option price was determined based on an independent appraisal.
4. INVESTMENT IN AFFILIATED COMPANIES
On July 1, 1994, the Company purchased from Leandro P. Rizzuto, President and
sole stockholder of the Company, his 50% interest in Rusk, Inc. at his cost of
$575,000. This investment is accounted for under the equity method. Rusk,
Inc. is a marketer of upscale, professional only hair care products.
On August 16, 1994, the Company sold its 50% interest in Farouk Systems, Inc.
and Farouk International for $2,500,000 in cash. This investment was accounted
for under the equity method and the gain on the sale of this investment was not
material.
CONAIR CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
SALES
Net sales in the third quarter and first nine months of 1994 increased 19% and
19.5%, respectively over the comparable periods in 1993. The increases in the
third quarter and the first nine months of 1994 were primarily due to increases
in most product categories as well as the sales of Southwestern Bell Freedom
Phone Products which were not sold during the first quarter of 1993.
GROSS MARGINS
Gross margins for the third quarter and first nine months of 1994 were 30.8%
and 31.8% of net sales, respectively. Gross margins for the third quarter and
first nine months of 1993 were 31.3% and 32.5% of net sales, respectively. The
variances in gross margins are primarily due to product mix.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expenses in the third quarter and first
nine months of 1994 were 21.9% and 24.7% of net sales, respectively. Selling,
general and administrative expenses in the third quarter and first nine months
of 1993 were 24.0% and 26.9% of net sales, respectively. The declines resulted
from the fixed and semi-variable nature of certain costs in this category.
INTEREST
Interest expense has increased as compared to the same periods last year due to
an increase in the Company's long-term debt.
INCOME TAXES
The effective income tax rate varied in the third quarter and first nine months
of 1994 as compared to the same periods in 1993 primarily due to the
amortization of the excess cost of investments over net assets acquired, not
deductible for tax purposes.
CONAIR CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital was $135,319,000 at September 30, 1994 and the
current ratio was 2.2 to 1. The Company's cash balance was $11,673,000, short-
term borrowings were $32,000,000 and long-term debt was $99,541,000 at
September 30, 1994.
The Company believes its capital resources are adequate to finance normal
growth and service the Company's debt obligations. At September 30, 1994, the
Company had short-term lines of credit with banks in the United States and
abroad aggregating $89,400,000, which includes $25,000,000 available for the
period June 1 to November 30 to finance its seasonal business needs.
On March 15, 1994, the Company acquired its Stamford, Connecticut executive
office facility from Leandro P. Rizzuto, President and sole common stockholder
of the Company. The purchase price of $20,000,000 was determined based on an
independent appraisal. A ten-year unsecured loan in the amount of $20,000,000
was obtained by the Company on the above date to finance this transaction. The
interest rate on this new loan is 7%. Principal repayments on this loan begin
on June 1, 1996 with the payment of $625,000 and variable sums are due semi-
annually on June 1 and December 1 until a final payment of $4,000,000 at
maturity on February 28, 2004. The Company leased back to Leandro P. Rizzuto a
portion of the facility for a period of 99 years subject to the Company's
option, for a period of 10 years, to buy back the lease rights. The option
price for the Company to repurchase the lease rights is $4,000,000 for the
first five years, escalating to $6,400,000 over the remaining five years. The
initial option price was determined based on an independent appraisal.
CONAIR CORPORATION AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 6: Exhibits and Reports on Form 8K
(b) The Company was not required to file reports on Form 8K during the quarter
ended September 30, 1994.
CONAIR CORPORATION AND SUBSIDIARIES
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CONAIR CORPORATION
(Registrant)
November 11, 1994 /s/ Leandro P. Rizzuto
(Date) By: Leandro P. Rizzuto
Chairman of the Board
and President
November 11, 1994 /s/ Patrick P. Yannotta
(Date) By: Patrick P. Yannotta
Sr. Vice President-Finance
November 11, 1994 /s/ James A. Porcelli
(Date) By: James A. Porcelli
Corporate Controller
